The U.S. Supreme Court has struck down the emergency tariffs put in place by the Trump administration, a decision that is set to ripple through the insurance industry and beyond. The court ruled 6-3 that the administration overstepped its powers under the International Emergency Economic Powers Act (IEEPA), striking a significant blow to a key part of Trump’s economic strategy.
These tariffs, which were sometimes as high as 145% on goods from China, raised costs across many industries. This pushed up prices for replacement parts, materials, and equipment in sectors like automotive, construction, and manufacturing. Insurers had warned the tariffs would drive up claims costs, and these higher costs often ended up as premium increases for customers.
With the Supreme Court ruling the tariffs unlawful, insurers may see relief. Lower import costs could lead to better pricing stability for commercial property and inland marine insurance. This could ease upward pressure on loss ratios caused by the earlier surge in replacement costs. Canadian insurers, especially those dealing with trade across borders with the U.S., might also benefit as supply chains smooth out.
However, the ruling leaves big questions unanswered—most notably what will happen to the more than $134 billion already collected from these tariffs. The court left it up to lower courts to decide if importers will get refunds. If refunds are ordered, the process could drag on, creating financial uncertainty for businesses. This could also lead to claims on trade credit and political risk insurance tied to cash flow disruptions during the refund process. Directors and officers insurance is also in the spotlight, as companies that based strategies on tariff-inflated prices could face shareholder lawsuits if their financial outlook changes abruptly.
The decision also changes how insurers look at political risk and regulatory unpredictability. It shows limits on executive power, especially when it comes to emergency trade actions, meaning insurers might adjust political risk pricing to reflect the chance that such trade measures can be reversed by courts. For Canadian insurers with U.S. subsidiaries, a more predictable legal scene might help, though cross-border rules still add complexity.
Tariffs had acted like a hidden tax on imports, pushing inflation up in key areas. Commercial insurers had to raise premiums to keep up with higher material and labor costs, especially in property and builders’ risk policies. With tariffs now ruled invalid, insurers could rethink their cost and inflation models, possibly lowering long-term price trend estimates in sectors heavily reliant on imports from China and other countries targeted by the tariffs.
Canada, which felt the impact of tariffs on steel and aluminum, stands to gain from this decision as well. Greater trade stability with the U.S. should reduce risk volatility for Canadian insurers covering manufacturing, transportation, and export businesses. This might also improve loss forecasts for business interruption insurance.
As courts sort out refund issues and lawmakers consider new trade rules, insurers in both countries will be watching closely. These developments have the potential to reshape trade, pricing, and risk management across North America in the months ahead.